Archive for 2007

Wild Weekly Wrap-Up – Down Goes Cramer!

  • biodieselchris – Posted August 3, 2007 at 3:47 pm | Permalink

    "every position I had was green today. Even LEND calls.  I have never seen that since I started investing in 2000.  And in no small way some thanks is in order to PSW…  "

    Thanks BDC!  What a great way to end a great week in the markets!

    We finally got the beginnings of the correction we've been planning for and all those investment in the "wrong" direction have finally paid off.  We stand now at the tip of a major inflection point in the markets and, as I'm taking a vacation, I've left the 25% of non-cash positions very well hedged (I hope) with a remaining downside bias.

    Paranoia really paid off this week as we very simply nailed the market movements on the head.  If I weren't going away (and already in trouble for not packing yet!) I could write the most amazing essay about how we (Happy, Zman, Sage and I) arrived at these conclusions but I will just say it was a great team effort and I couldn't be prouder of both our writers and our great contributing members who make up the smartest community of market watchers I've ever been a part of!

    As many of you know, Happy Trading and ZMan are "going pro" this month and this is going to be a great thing.  The ability to devote more of our time to the markets and more time to this newsletter has truly turned this from a hobby (and if you doubt that feel free to go back to my 2005 blogspot files!) into a real profession and I can already see the level of analysis ratcheting up as we each get comfortable knowing that, day-in, day-out THIS is what we do for a living!

    Anyway, so the PSW team was in full swing this past week.  Actually, why be modest?  This whole month has been incredible but the quick highlights of the week were:


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Vacation Notes

Notes on positions for members:

I’m sorry i didn’t get to finish the LTP review.  The market got crazy and that thing with the mortgages came up Wednesday which caused me to pull an all-nighter trying to figure out what was going on which led me to conclude that the markets were about to collapse.  This is what I do to protect my own virtual portfolio – study, study, study and sometimes I have to prioritize.  As fast as I read it still does take a lot of effort so I’m sorry AND not sorry at the same time as I think arriving at the correct market call trumps specific roll recommendations.

Please take a good look at the LTP and feel free to question the logic of any rolls or covers you see.  I pretty much covered everything that made sense to cover, mostly with Septembers (on new covers) as I’ll be away and it’s less hassle but, ordinarily, I hate to give my callers more than 30 days to cash in.  The structure of my current virtual portfolio is not aimed at making money in either direction, my goal is to be about neutral when I get back on the 20th but I will take action as appropriate

Most of my callers/putters have 50% hard stops on them, which I hate but not as much as I hate giving someone a double!  My other positions seem well balanced enough – I figure if they survived this week, what the heck else can the market do to them? 

It’s one thing to call for 12,500 as a "necessary correction" and quite another to see it happen.  I take no pleasure in being right about a crash but it sure beats being wrong!  My original correction call was for 11,500 but that was way back in November and we did correct to 12,000 so I feel satisfied with that but this run became unhealthy when the PPT wouldn’t let the market correct below 13,500 in June and the run to 14,000 was pretty much a joke given the economic environment.  The more you put off a correction, the worse it can get and if 13,000 doesn’t hold I think 12,500 is a certainty.  Understand (for all you 1-min chart watchers) that not holding 13,000 means breaking below 12,900 for more than a day, not skimming to 12,995 in intra-day trading!
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Friday Virtual Portfolio Moves

Posted August 3, 2007 at 10:31 am | Permalink (Edit)

Downside – I’m still following mattress play rules of course although I wish I hadn’t cut off my August puts yesterday as they would have been great this morning but I’m around 80% cash and carrying the September AND August puts was overkill and dangerous going into my vacation.

FAF is driving LFG and FNF further south!

EOG Sept $75s at $2.50 are cheaper than yesterday, not a bad play to make. XXX

CYCL – this is another good one to own and sell calls (7% return on sept here) as they are a solid long-range outlook but who the hell knows what mid term. Mar ‘08 is the furthest out you can go and $1.50 for the $10s (15%) is a bit much but, on the other hand, you can buy the stock for $9.81, sell the March calls for a net 8.31 basis and, if you get called away at $10 that’s 20% for 7 months – you could do a lot worse in this market. When you enter thinly traded issues like this it is best to just buy maybe 500 shares at a time and see how long it takes to sell leaps before committing to that strategy. XXX

Posted August 3, 2007 at 10:37 am | Permalink (Edit)

Hurricane outlook reduced! Oil falling fast, very good time to think about our hurricane plays.

Posted August 3, 2007 at 12:05 pm | Permalink (Edit)

Options trading in July was up 72%, a new record, I think we may have contributed a point or two on the mattress plays alone! OXPS Mar $27.50s are $2.17 and you can sell the Aug $27.50s for .30 (but I’d wait for a bounce) XXX

PCLN – I decided to risk my Oct $75s into earnings but my basis is just $1.45 on 10 so not exactly betting the farm. SINA/BAY – that’s an interesting trading pair! Big Pharma is getting hammered and BAY looks attractive here but so did PFE last month! SINA falls under my don’t bet on China ADR rules, which I often break and would consider doing for this one as I think they are in just the…
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TGIF!

Woo hoo – vacation time!

Usually when I take off I am filled with regrets as I hate to miss the fun in the markets but I've never been happier to lighten up on positions and take a break.

I've been talking about fundamentals all week, possibly looking a little like Chicken Little as I'm telling people the sky is falling while the market rallies but I'm not here to win a popularity contest so I'm really pushing the "better safe than sorry" school of investing this month as my best case scenario for the next couple of weeks is that we consolidate around 13,600 and my worst-case scenario is downright depressing!

Not as depressing as working for AHM of course, that company announced they would cease "most" operations and will be letting go of 6,250 of their 7,000 employees.  If you ever need to be reminded how clueless the market can be, take a look at yesterday's chart on American Home Mortgage as it went from $1.50 to $4.50 and back to $1.50 in yesterday's trading.  This is real money people, not play money – what the hell are you thinking?!?

[Endangered Loans]According to today's WSJ, lenders are clamping down on all risky mortgages, that includes "Alt-A" mortgages like no-doc loans that speculators often use (when you have lots of money and no time).  Since $1T worth of Alt-A and Sub-prime loans were written last year and the year before, we can assume at least (and boy, am I being kind) half of those deals will die this year, knocking out $500Bn of home transactions.  At a national average of $250K per home and assuming the 1/2 of those loans are refinances (also generous), that's 1M homes that won't move, close to 1/4 of a year's total transactions

  • That's 1/4 less commissions for realtors
  • That's 1/4 less business for the mortgage industry
  • That's 1/4 less business for movers, decorators, painters….

Overall July employment was up 92,000 in this morning's report, quite a bit less than the 135,000 expected and LESS THAN HALF of last July's 220,000 jobs.  The "growth" came in health care, hospitality and, surprisingly, financial services but AHM will certainly fix that!  This is pretty bearish for a "Goldilocks" number…
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Thursday Wrap-Up – Are the Brokers Broken?

Yipee, another strong finish in the markets.

Now we made some technical levels and I'm happy and Happy Trading is happy:

 

Just because we are happy does not mean we are jumping right back into the markets but we have been nibbling at a few leaps as this has been a very good time to establish a few longer plays in case we really are on the road to recovery.  I've been cashing out with no regrets as this is my second to last day before vacation and the market just doesn't seem like the best place to keep my assets while I'm away!

Will we have follow through to this very positive movement tomorrow?  Well, if we don't, I'll be much doom and gloomier about the future as we have every technical reason to march the S&P to at least a retest of 1,510 and consolidating over that line would be a very good thing (Dow about 13,600).  The chart for the Nasdaq also looks promising:

 

While this all does make for a pretty chart, I have often said charts can be forced and 2 consecutive days where 100% of our gains came after 3pm in one giant spike may move a chart but do not move me to move my money back into the markets. 

There are still some very ugly fundamentals to deal with.  As I noted in the morning post, the credit market issues are spreading RAPIDLY and it is beyond naive to think that this is just a bump in the road and it's the denial that makes me nervous. Just  a week ago today I said (in large typeface) "When the M&As start to unwind it is time to be all cash or short the market – this is that time!!!"  Today the WSJ counts 46 M&A deals worth more than $60Bn have been pulled since June 22nd (see I needed a large typeface again!).

So not only has nothing fundamentally changed since I started becoming concerned about the markets but things are deteriorating rapidly.  How many deals were pulled last year?  None!  A lot of work goes into setting up an M&A deal and things have to be pretty catastrophic to take all that work, pay all those…
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Thursday Virtual Portfolio Moves

Posted August 2, 2007 at 9:57 am | Permalink (Edit)
FAF etc – I’d take them off the table and key on FAF for another down leg as they have barely dropped compared to LFG and FNF is a stronger company. If you take it all off the table and pick up some Oct $40 puts for $1.75 but if the market comes back these guys will all recover somewhat so what’s so bad about taking 700% off the table??? I’m sure we’ll find something else to trade tomorrow.
Posted August 2, 2007 at 10:44 am | Permalink (Edit)

TASR – just a buying opportunity here. I’ve got the ‘08 $15s, now back to $2.15 and I cashed in the $17.50s I sold against them at $2.80 for .25 and then sold the $15s against for .80, now .47 so how can I be upset? Back down here I’m going to roll to some ‘09 $12.50s at $5 and work my way back.

WFR – I’ve got the Jan $60s naked and I’m waiting hopefull get a couple of bucks for the $65s but I will sell the $60s for $2 if the market (especially the SOX, which are already sub 500) starts to break down.

Posted August 2, 2007 at 11:23 am | Permalink (Edit)

XOM in a death spiral! Other majors following. I’m tempted to go with XLE $67 puts but this is the point when they usually turn around so I will be patient… 8-(

JBX – new sirloin burger was a big hit and they got a very big, unwarranted sell-off from last earnings. The sirloin is $4.49 vs $1.39 for their regular burgers. I like the Mar $70s at $4.95, selling 3/4 the Sept $65s for $3.40 which puts you in for $2.40 with 5 months to roll. XXX

Posted August 2, 2007 at 11:56 am | Permalink (Edit)

I’m trying to decide if we can put together another 100 points and the SPY is far behind the DIA this morning so I’ll take a shot at the $147s for $2.55 XXX

Posted


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Thursday Morning

The markets seem once again determined to open positive so who am I to argue?

In my wrap-up yesterday we discussed a possibly disastrous situation developing in the bond markets and this morning I see that MS is being fined for overcharging retail investors as much as 18% on bonds they recommended as "safe" investments.  MarketWatch's has an article about 20 tipping points that can wreck this rally and the WSJ has had to start a chart to track  How Credit-Market Tremors Have Affected Junk Bonds, LBOs and Hedge Funds.

Just this week alone they've added the following:

07/30/2007 IKB Deutsche Industriebank AG   Profit problems   CEO left; profit warning issued   Company says it can't maintain its earnings forecast of EUR280 million for the 2007-08 financial year; IKB says it has "felt the impact" of the U.S. subprime crisis; Commerzbank said the difficulties will shave its profits by 80 million euros  
07/30/2007 American Home Mortgage Investment   Margin Calls   Banks demanded more cash after the lender wrote down the value of its loan and security virtual portfolios   Shares of the real-estate investment trust were halted for more than a day; lender delayed paying dividends on common stock, may delay payments on preferred shares because of margin calls; may have to sell assets, find new financing, or restructure debt to meet banks' demands  
07/30/2007 Stoneridge   Offering delayed   $200 million senior secured term loan postponed indefinitely due to "unfavorable market conditions   The electronic component maker was forced to cancel its tender offer to purchase its $200 million in outstanding senior notes  
07/30/2007 Insight Communications   Offering delayed   Bids for the New York cable operator were due yesterday, now delayed more than a week by the firm's bankers   Bankers at Morgan Stanley delayed to give private-equity bidders more time to line


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Wild Wednesday Wrap-Up

"Whether you are a bull or a bear, please be careful out there"  – Me, 9:30 this morning!

Wow – a little something for everyone today!

  • Dow_aug_1_0709:30: 13,211
  • 09:36: 13,280 (+69)
  • 09:49: 13,159 (-121)
  • 10:20: 13,286 (+147)
  • 11:00: 13.135 (-151)
  • 12:35: 13,307 (+172)
  • 01:24: 13,173 (-134)
  • 02:05: 13,246 (+73)
  • 03:26: 13,146 (-100)
  • 03:56: 13,391 (+245)

That's 1,212 worth of Dow movement in just one day!  Needless to say it was very exciting for us and we had a ball getting in and out of oil puts, and calls as well as index puts and calls on a day that was lots of fun but also reminded us why we are mainly in cash!

We had successful tests of both the S&P at our target of 1,440 and the Nasdaq at 2,525 but I thought the end of day movement looked a little forced so I remain in full-blown skeptical mode:

 

Oil came down just a bit today ($1.68), despite a large draw in crude inventories - hopefully it was something we said!   Let's keep forwarding Tuesday's wrap-up to every politician you can get your hands on until we start hearing questions about crooked oil trading being thrown at the candidates! 

I'm not going to say anything else about the markets just now other than the fact that I got a very disturbing call from someone in the mortgage industry and he told me that there is a liquidity crunch in the credit industry and margin calls are being made.  I will warn you that this is, so far (10pm) unsubstantiated and it is unlikely I'll know until morning but what that means is this:

Higher credit risk is driving DOWN the price of bonds (you pay face or "par" value for a bond but the value of the bond fluctuates depending on whether the rate of interest you get is better or worse than the prevailing rates and the…
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Wednesday Virtual Portfolio Moves

Posted August 1, 2007 at 9:43 am | Permalink (Edit)

XOM making a break for it, the Dow needs them above $93 to make real progress. AAPL failing in its comeback (very bad sign as it just got an upgrade). BIG WARNING – despite the “rally” my index puts are UP and my DIA calls are down – that indicates tremendous negative sentiment!!!

Posted August 1, 2007 at 9:49 am | Permalink (Edit)

Shorting – I was looking to short the DIA but then I ran into that very strange option behavior. CME may make a fun mo play with the $550 puts at $9.50 XXX

AAPL – answer – a lot! This is a roll down play as an upside hedge against a bearish virtual portfolio. If we are going to recover Apple should be a leader. I already moved to the $140s and now the $135s are getting interesting at $10.05. It’s costing about $2 per roll to gain $5 in position but I can still get $6 for the Aug $130s if I decide it’s hopeless.

Posted August 1, 2007 at 10:43 am | Permalink (Edit)

Go Google! Go Apple! Go markets!

NAK – I would hope for a pullback as a new entry, they’ve had a great run and it’s still a long time until they get production out of Alaska. That’s not in a current virtual portfolio, just my retirement account along with GE, OLED (not for long), EBAY, T, INTC and TASR. Those are essentially the stocks I expect to be up consistently for the next 25 years. I sell calls against the slow ones but usually 5% out of the money for roughly an 8% annual bonus to the movement of the stocks.

ISM was fine – exports were strong per my restaurant example this morning. And yes, Chris, there is a small shakedown operation going on but once we are under new management I think a lot of that will repair itself, assuming we can stay in business that long!

GRMN/MA/EVERYTHING – Rule #1 – I’m not even going to say it again!

WFR around $60 is a buy from me too! XXX

Inventory play – XOM can give back that $1.20 gain…
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Always an Option 1:3 – August 2007

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Always an Option 1:3

As always, we appreciate any feedback. Fire off an email to admin@philstockworld.com.  Also, this is a great opportunity to remind everyone: please add our email address to your address book, white list, safe list, or whatever else you use so that messages from us don’t end up in your junk folder.





 
 
 

ValueWalk

#1 Performing Global Macro Hedge Fund Sees More Shorts Opportunities Ahead As China Bursts

By Jacob Wolinsky. Originally published at ValueWalk.

Crescat Global Macro Fund update to investors on 1/19/2019

Crescat Global Macro Fund and Crescat Long/Short fund delivered strong returns for both December and full year 2018 in a difficult market. Based on ...



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Zero Hedge

Johns Hopkins, Bristol-Myers Face $1 Billion Suit For Infecting Guatemalan Hookers With Syphilis 

Courtesy of ZeroHedge. View original post here.

A federal judge in Maryland said Johns Hopkins University, pharmaceutical company Bristol-Myers Squibb and the Rockefeller Foundation must face a $1 billion lawsuit over their roles in a top-secret program in the 1940s ran by the US government that injected hundreds of Guatemalans with syphilis, reported Reuters.

Several doctors from Hopkins an...



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Divisive economics

 

Guest author David Brin — scientist, technology consultant, best-selling author and futurist — explores the records of Democrats and Republicans on the US economy in the following post. For David's latest posts, visit the CONTRARY BRIN blog. For his books and short stories, visit his web...



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Kimble Charting Solutions

Stock declines did not break 9-year support, says Joe Friday

Courtesy of Chris Kimble.

We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

If you find long-term perspectives helpf...



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Digital Currencies

Transparency and privacy: Empowering people through blockchain

 

Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...



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Cars.com Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

Courtesy of Benzinga.

Related 44 Biggest Movers From Yesterday 38 Stocks Moving In Wednesday's Mid-Day Session ...

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Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

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Biotech

Opening Pandora's Box: Gene editing and its consequences

Reminder: We are available to chat with Members, comments are found below each post.

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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